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Taiwan’s solar technology industry, the world’s second largest, faces possible U.S. government trade sanctions after selling components to Chinese producers that shipped finished modules onward to the United States. Word in Taipei: They’re not guilty but might be hit anyway as Washington tries to protect local developers against red-hot imports.

The U.S. Department of Commerce will decide whether findings by its International Trade Commission Feb. 14 merit anti-dumping penalties against Taiwanese exporters. Taiwanese makers of photovoltaic cells for finished Chinese modules are bracing for a harsh penalty as the commerce department crunches financials to determine how much Taiwan’s industry made from the fourth quarter of 2012 to the third quarter of last year. A final verdict is due in August. Taiwanese suppliers stood a 50-50 chance of profiting then, says the Market Intelligence & Consulting Institute, a government-backed IT industry research group.

Bruce Cheng

Taiwan is innocent, the research group says, but solar components could be slapped anyway as the United States frets about a trend of lower priced imports.

“A rational interpretation of the criteria will not provide sufficient support for the U.S. government’s decision to impose anti-dumping and countervailing duties on Taiwanese PV cell vendors," institute senior analyst Sean Kao says. "However, many Taiwanese vendors are still pessimistic about the possible final ruling, expecting that the United States will hurt Taiwan based on the consideration of its own benefits.”

Taiwan’s solar tech industry took off about 10 years ago along with global growth of solar energy and was worth $3.7 billion last year. Its annual capacity of 8,000 megawatts worth of equipment ranks as the world’s second largest industry after China’s. The industry star is Neo Solar Power, the largest maker in Taiwan and second in the world. Delta Electronics, founded by billionaire Bruce Cheng, is Neo’s biggest shareholder with a 17% stake. Taiwan's Gintech and Motech also rank among the world's top 10. Product-specific sanctions could technically raise tariffs on any of them, with levels above 10% likely hurting orders overall and outraging Taiwanese exporters.

Taiwan had no way of knowing the Chinese module makers would export to the United States, says Arthur Hsu, analyst with Taipei-based market research firm TrendForce. The U.S. government imposed anti-dumping duties on Chinese solar panels imported since October 2012. “Taiwan just got stuck in this,” Hsu says. “To sell outside is China’s own decision. Taiwan is a supplier to the Chinese side, and we can’t go and ask where the modules will sell.”

The threat of sanctions started last year with an International Trade Commission complaint from SolarWorld Industries America. The U.S. government may back its cause to protect the not-so-shining state of America's industry. Solar imports already claim 30% to 40% of domestic demand and cost 10%-15% less, Hsu says. “We don’t think Taiwan affected U.S. businesses,” he says. Whether U.S. officials pursue them is “hard to say.”